Major CPF policy shift on the way

[SINGAPORE] The government plans to allow those aged 65 and above to withdraw a portion of their Central Provident Fund (CPF) savings in a lump sum.

The exact cap will be revealed at a later date, but Prime Minister Lee Hsien Loong said that the amount to be taken out "cannot be excessive". One possibility he mentioned was limiting it to 20 per cent of a member's total CPF funds.

Outlining this major policy shift for the country's compulsory savings scheme for workers, Mr Lee said that he made the decision after considering it for "a long time" and discussing it with his colleagues.

"We should allow people the option to take out part of their CPF savings in a lump sum, if they need to, subject to limits . . . it should only be during retirement, (that is) 65 and beyond," he said at the National Day Rally last night.

He stressed, however, that people must be fully aware of the trade-offs of making such a withdrawal, for this would mean having less in their accounts for the future and a smaller monthly payment.

Speaking at the Institute of Technical Education College Central campus in Ang Mo Kio, Mr Lee shared two views on the purpose of CPF funds. One is "I want to be assured of a steady stream of income in my old age" and the other is "I want a lump sum now because I need money urgently".

"My view is that the core purpose of the CPF should still be providing a steady stream of income in old age," said Mr Lee, adding that he understood why some had expressed the desire to take more money out of their accounts.

"They have been saving up over a lifetime of work. They want to use some of these savings to do something they have long wanted to do, such as go on a journey or a Haj, fulfil a lifetime dream or deal with some family emergency."

Some observers that BT spoke to noted that allowing a partial withdrawal would go some way towards appeasing those who want a portion of their CPF savings in cash.

"The policy is definitely going to meet some of the short-term frustrations of those people," said Nanyang Technological University assistant professor Walter Theseira. "But giving people money in hand isn't necessarily going to give them the ability to have adequate money for retirement."

Mr Lee also announced that the CPF Minimum Sum will be raised next year to S$161,000 for those turning 55 from July 1, 2015 to June 30, 2016. This is up from S$155,000 for CPF members turning 55 from July this year to next June.

The Minimum Sum was set at S$80,000 in 2003 and has been raised gradually each year to account for inflation. Those who cannot meet the Minimum Sum for their specific cohort can withdraw only S$5,000.

Mr Lee said that next year's increment would be the final one for now, and there was "no need" for any further major increases to the Minimum Sum.

"But we will still need to adjust the Minimum Sum from time to time, as incomes go up and our basic spending needs increase, and as we live longer and need to provide more money for a longer retirement."

Noting that changes to the CPF scheme are "very complicated", Mr Lee said that the Manpower Ministry would form an advisory panel to study the various issues, including a review of the Minimum Sum beyond 2015. Details of the panel will be announced soon.

He also said that the government would extend the Lease Buyback scheme to include four-room flats, which would cover more than half of all flat-owners in Singapore. The scheme, currently only open to three-room units or smaller, allows homeowners to sell part of their flat's lease back to the government for cash.

In another effort to help the low-income elderly, Mr Lee said that they would receive a new Silver Support bonus each year, starting from the time they turn 65. This is "something extra" to help them with their living expenses and cost of living, and is on top of other government and community support that they receive. More details of this bonus will be shared at next year's Budget.

Mr Lee said that while the CPF and home ownership schemes, the twin pillars of retirement adequacy, have worked well for the majority of Singaporeans, they should not be seen as "one-size-fits-all" policies.

"They offer different choices for people of different circumstances. We are improving them further, to better support lower-income elderly who need more help, and to make the schemes more flexible for all Singaporeans."